Does Filing for Unemployment Hurt You?

Unemployment benefits provide financial support to people who have lost their job or quit for legitimate reasons (for example, the company relocated and would require an excessive commute to maintain the job, or if your paychecks were bouncing). Although unemployment benefits can provide the necessary gap between squeezing by financially and facing financial catastrophe, keep in mind that there are drawbacks to filing for unemployment. Learning the ways that filing for unemployment can hurt you will help you avoid these missteps, or determine if filing is the right choice for you.

Fraudulently filing for unemployment could land you in jail.

Credit Score

Credit scores are a three-digit number indicating how well you manage finances to lenders, landlords or potential employers. Credit scores show items including your debt volume, types of accounts open (for example, credit cards and student loans) and whether you make on-time payments. Negative financial events including filing for bankruptcy or having accounts turned over to collection agencies will show up on your credit score, but filing for unemployment will not show up in your credit history. This is because unemployment checks are a type of benefit intended for individuals who need it; there's nothing inherently negative about seeking a financial cushion following job loss.

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Lowered Income

Filing for unemployment may hurt you indirectly because unemployment checks will typically be smaller than paychecks you're accustomed to receiving. Without proper financial management, you may begin to miss payments on utilities, student loans or credit card bills. When funds run short, you may rely excessively on credit cards for necessary purchases including food or gas. Missing payments on bills owed will hurt your credit score over time; the same is true for racking up increased debt loads through credit cards, especially if you're tacking on late fees and penalties for exceeding balance limits. Troubleshoot by getting in contact with lenders, including student loan companies or credit card companies, and explaining your situation. They may permit you to defer loan payments, lower interest rates or waive annual fees in the interest of keeping you as a steady-paying customer.

Incorrect Applications

Filing for unemployment can land you in jail, tied up in court fees or paying big penalties if you intentionally misrepresent information on your unemployment benefits application. Genuine mistakes may be corrected without much fuss, but if the government or your previous employer finds out that you falsify information on your application (for example, stating that you were laid off but in fact were fired for operating heavy machinery while intoxicated) then you're in big trouble.

Meeting Requirements

Unemployment beneficiaries must meet requirements in order to continue receiving benefits, and this can be time-consuming. You may need to document job searches, resume clinics, interviews and other attempts at landing employment, and may be required to periodically meet with unemployment officers to discuss your case. This won't hurt you directly, but fulfilling claim paperwork requirements and traveling to and from the unemployment office may take away from time spent actively job hunting.